Experian

Finance, lease, subsribe or buy — here’s what you need to before you jump in.

2018 Buick Enclave Premier.

New car leasing is similar to renting a car, but in this case your rental term lasts for two, three or more years. You never own the car you lease and if you end your lease early or exceed the allotted miles, you will pay some costly penalties.

With these things in mind, why would anyone want to lease a new car? For several reasons, including:

1), you want to drive a more expensive car,

2), drive a new car every few years or

3) you simply don’t have much cash to plunk down for a down payment.

If you fall under any of these three reasons, then leasing’s appeal may be strong for you.

Just like buying a car, you should do your research to find the vehicle you want and the best leasing deal possible. Leasing deals are negotiable—you’ll want to put out the least amount of cash up front while limiting your monthly lease payments.

2018 Mazda CX-5 Grand Touring.

1. Know your credit score.

If you have a good credit, then a high credit score should provide you the best leasing deal. Obtain your credit score from at least one of the three credit reporting bureaus — Equifax, TransUnion and Experian — to see where you stand. A score of 700 and higher reflects “good credit management” according to Experian.

2. Choose your car.

Find the type of vehicle you want and narrow your list to about three models, each of which you should test drive. Buy the car you know you’ll be happy with for the next several years. If you settle for something that you’ll tire of quickly, you’ll either be stuck with a car you dislike until the end of the lease term or be forced to pay hundreds, perhaps thousands, of dollars to break your lease.

3. Compare lease deals.

Most leasing plans are offered through your new car dealer, although arranging a lease privately is possible. Avoid being pressured by any dealer offering a “take it or leave it” deal on auto leasing—shop several dealers for the best terms.

4. Negotiate the price first.

Consider not telling the new car sales person that you want to lease your vehicle until after you negotiate your best price. Your lease is based on the final agreed upon price, so try to lower that price to hold down your overall costs and reduce your monthly payments. You can find out what a dealer paid for the car by buying a new car price report from Consumer Reports and using that information to negotiate.

5. Calculate your lease.

Before signing your lease agreement, you must calculate your costs; use a lease calculator such as one found on leaseguide.com. Your negotiated price is your base capitalization cost, which should be lower than the car’s sticker price. Be mindful of other costs including acquisition fees, a luxury tax, state sales tax and lease insurance. Adjust this figure by the amount of money you put down and any trade-in credit. Your dealer has a residual value in mind, which is what the manufacturer determines what your car will be worth at the end of lease term. In addition, leasing companies use a “money factor” or interest rate to determine costs—include that number and your term (months) to determine total lease costs and your monthly payment.

Take Your Time

New car leasing sounds complicated, doesn’t it? That’s why you should take your time to come up with the best deal to find the car you’ll be happy driving for several years. If you rush the process, you’ll pay hundreds, perhaps thousands of dollars more on your lease.

Every consumer has a credit score, a three-digit number that is based on your credit history and behavior. That number can have a profound impact on the way that you live as mortgages, personal loans and even apartments and a new job may depend on your score. The higher your credit score, the more likely creditors, landlords and hiring personnel will view you more favorably.

Insurance Score

Your claim history affects your insurance score.The insurance industry values your credit score too, but it is only part of a larger or more comprehensive measuring tool. That tool is your insurance score, a number that few people outside of the insurance industry are aware of.

The Insurance Information Institute describes an insurance score as “a numerical ranking based on a person’s credit history.” These scores help insurers assess risk and are also considered “a good predictor of insurance claims.”

An insurance score is based on actuarial studies that indicate whether a person is more likely to file a claim or not. Consumers with a lower insurance score are more likely to file a claim and will, therefore, be charged higher premiums.

Credit Bureaus

As you might guess there is a parallel between credit scores and insurance scores. The former is used to predict credit delinquency, the latter is for predicting insurance losses. Both scoring methods are based on information gleaned from your three credit reports, data that is collected by the three credit reporting bureaus: Experian, Equifax and TransUnion.

One problem here is that some consumers may have very little credit, choosing to pay cash for their purchases. Employing wise money management may cost you financially as a lower credit score can result in higher auto and homeowners premiums, with no consideration given to what your earn. This isn’t fair, of course, but we do live in a world of credit.

Insurance Scores

Just as credit scores serve up a three-digit number, your insurance score does the same thing. That scoring range extends from 200 to 997, with 776 on up representing a good score. Scores of 500 or below put you in the poor score range with both your car insurance and your homeowners insurance premiums most likely coming in double reports the New York Times.

Insurers have another way of calculating risk. Two databases contain claim information: the Comprehensive Loss Underwriting Exchange (CLUE) and the Automated Property Loss Underwriting System (A-PLUS). Anything that insurers want to know about your claim history can be easily found.

Reporting Errors

With your credit reports playing such a significant role in determining two very important scores, the information found in each report should be correct, right? Unfortunately, facts tell us otherwise.

The Federal Trade Commission in a December 2012 report to Congress found that 26 percent of the 1,001 participants in an FTC study reported finding errors in at least one of their credit reports. These consumers reviewed 2,968 credit reports with 19 percent or 572 reports disputed.

Of the reports disputed, 399 had a modification made by the respective credit reporting bureau with 195 consumers reporting a credit score increase following the adjustment. Of the 195, two thirds reported an increase of 10 points or more — what might seem like a small number, but one that could have far reaching consequences for some insurance shopping consumers.

Reports and Scores

By law, consumers are entitled to receive one free copy of each credit report annually. Your free reports are available at AnnualCreditReport.com, a website that was set up by TransUnion, Equifax and Experian. Obtain copies of all three reports and if errors are found, following the reporting bureau’s instructions on how to file a dispute.

You can also obtain your credit score for a fee. A visit to MyFico.com will give you that score.

What about your insurance score? Is that information available to consumers too? Yes it it is. If you visit the Lexis Nexis site, you can obtain separate home insurance and auto insurance scores. Moreover, you can also obtain free CLUE reports that offer a seven-year history of the losses associated with your personal property or automobiles.